sir, you write: "the next fed leader should be committed to ensuring that america's unemployment rate falls below its current unacceptably level"; I read in L'Echo 3/12/2013 (belgian financial paper) that Apple is producing in gale force iPhones in ZHENGZHOU - China occuping nearly 250000 people using USA technology; How the FED can avoid this situation?ch Van poppel;

From the start, Janet Yellen has been an outspoken supporter of Ben Bernanke’s radical monetary experiments, particularly zero interest rates and quantitative easing. Dr. Yellen advocates vigorous government intervention in the economy. That’s a tragedy, says David Ranson, head of research for Wainwright Economics, because there is a strong empirical case for skepticism, especially with respect to the Fed’s power to stimulate credit and employment. Debt monetization has been used on a moderate scale throughout the past, and its effects (confirmed in analysis published by Ranson’s shop) can be evaluated by comparing the growth of the monetary base with the growth of the economy. In the evidence, Wainwright’s research finds an inverse relationship over the half century prior to the crisis and the post-crisis that shows quantitative easing inflates but does not stimulate. The best choice for the Fed chair should be someone who is doubtful that the enormous expansion in the Fed’s size, reach and powers has produced economic benefits, says Dr. Ranson. Yellen is an ardent advocate of expansionary fiscal policy, and supporter of increasing the Fed’s powers. Those who are skeptical about the role of government, and who are relegated by politics to the margins of this debate cannot be happy with the Janet Yellen, that is, Bernanke redux. Luis de Agustin

In India the Central bank Governor Subba rao who retired did not succumb to the FII Media and corrupt politicians but now we have an IMF Governor who is also a US citizens of Indian origin, one cannot say that any more.

Changing the guard means NOTHING unless you change the regulators.The failure happened because the regulators let the thieves (banks and ratings agencies) do anything they liked. Every American is still paying because the Fed. is printing billions of dollars of new paper money. This erodes the savings of the citizens. America is finished as fiscal power because it has shuffled debt and paper.It does not CREATE wealth.

Professor, aren't the leaders to which you refer just fronts for the powers that truly control the central banks? If we continue believing changing leadership will make a difference aren't we fooling ourselves?

Might have created new asset bubbles? With real unemployment still very high, isn't what we are witnessing in equity prices likely an illusion if the same folks who controlled the leadership then, control the new leadership now?

Let's hope a changing of the guarding facilitates more fresh ideas than in the UK when the new governor of the Bank of England could only manage a rehashing of forward guidance which does not instil much confidence. For more, see http://yourneighbourhoodeconomist.blogspot.co.uk/2013/08/same-low-interest-rates-but-for-longer.html

"That said, the US cannot afford a Fed chairman who is overly supportive of the financial sector and unwilling to regulate it."

This is the very reason that why Larry Summers is completely unsuitable to the chair of the Fed. First of all, cause of his work with Citigroup, the hedge fund D.E. Shaw and a venture capital society like Andreessen-Horowitz.

(Italian article about it http://tagli.me/2013/08/01/linfelice-scelta-di-larry-summers-alla-federal-reserve/)

Does Yellen have a cogent explanation why a quadrupling of MB had almost no impact on M2? Does she have a plan to get inflation and nominal growth up to the required levels? Is she happy with 7.4% unemployment? I consider her a hawk. I would prefer Summers because he is not a consensus-seeker. 7.4% unemployment and 3.8% nominal growth just doesn't deliver what the masses need.

In 2009 Joseph Stiglitz praised Spain for its excellent regulatory system. The Banc of Spain, as it turns out, didn't allow the purchases of American Toxic assets. Then Spain collapsed and mysteriously, Spain disappeared from Stiglitz's analysis.

Spain is exactly what is wrong with the argument that financial markets should be better regulated. Neither the regulators nor the Nobel-Prize-winning-oppinionated-analists like Joseph Stiglitz have any idea of what the next shock will come from. And as Spain's collapse was not foreseen by Stiglitz, the next financial crisis will not be prevented by any amount of smart regulations.

There was an excellent article by Joe Queenan entitled “Second Thoughts About Second Chances”WSJ June 15, 2013— which brilliantly implies that those who badly “bungle the job” should not be heavily rewarded with a largess of second chances.

Larry Summers is known for his altercations with others in his previous job incarnations. He was part of the group that steamrolled the CFTC in the 90’s and firmly entrenched the world in an unregulated OTC derivatives market—which played a pivotal role in bringing down the U.S. and global economies—promoting hyper-excessive leverage in the financial system. He was an advocate for the repeal of Glass-Steagall--which removed the risk management firewall in the banking sector.

There are two other very viable candidates mentioned as of late: Janet Yellen and Roger Ferguson Jr.

Ms. Yellen is extremely smart, a distinguished professor, a straight arrow, an experienced monetarist, former CEO of the San Francisco Fed, Vice-Chair of the current Fed Board of Governors—but most importantly, she was a strong advocate of risk management in the banking system early on.

Roger Ferguson, Jr. is brilliant, an experienced risk manger hailing from both the private and public sectors: as former CEO of Swiss Re (re-insurance) and as the current CEO of TIAA-CREF, the $350B pension entity. He was formerly Vice-Chair of the Fed’s Board of Governors and has recently been diligently involved in researching and publishing work aimed at stabilizing the banking system.

So: in this most important decision: who would be, in Mr. Queenan's parlance, the least likely to “bungle the job”?

I think the changing of the guard is a good time to look at the inadequacies of current monetary policy in terms of a blind focus on inflation while ignoring other things such as asset price bubbles as referred to here in this article. For more analysis, please have a look at http://yourneighbourhoodeconomist.blogspot.co.uk/2013/07/time-to-rethink-inflation.html

New Comment

Pin comment to this paragraph

After posting your comment, you’ll have a ten-minute window to make any edits. Please note that we moderate comments to ensure the conversation remains topically relevant. We appreciate well-informed comments and welcome your criticism and insight. Please be civil and avoid name-calling and ad hominem remarks.

Log in/Register

Please log in or register to continue. Registration is free and requires only your email address.

Log in

Register

Emailrequired

PasswordrequiredRemember me?

Please enter your email address and click on the reset-password button. If your email exists in our system, we'll send you an email with a link to reset your password. Please note that the link will expire twenty-four hours after the email is sent. If you can't find this email, please check your spam folder.